Question 1

If the Federal Reserve accommodates an adverse supply shock,

Accepted Answer

A) inflation expectations may rise which shifts the short-run Phillips curve shifts right. 
B) inflation expectations may rise which shifts the short-run Phillips curve shifts left. 
C) inflation expectations may fall which shifts the short-run Phillips curve shifts right. 
D) inflation expectations may fall which shifts the short-run Phillips curve shifts left 
A) inflation expectations may rise which shifts the short-run Phillips curve shifts right. 
B) inflation expectations may rise which shifts the short-run Phillips curve shifts left. 
C) inflation expectations may fall which shifts the short-run Phillips curve shifts right. 
D) inflation expectations may fall which shifts the short-run Phillips curve shifts left

Question 2

A central bank that accommodates an aggregate supply shock

Accepted Answer

A) increases the money supply,making the inflation rate rise. 
B) increases the money supply,making the inflation rate fall. 
C) decreases the money supply,making the inflation rate rise. 
D) decreases the money supply,making the inflation rate fall. 
A) increases the money supply,making the inflation rate rise. 
B) increases the money supply,making the inflation rate fall. 
C) decreases the money supply,making the inflation rate rise. 
D) decreases the money supply,making the inflation rate fall.

Question 3

When they are confronted with an adverse shock to aggregate supply,policymakers face a difficult choice in that

Accepted Answer

A) if they contract aggregate demand,the unemployment rate will increase further. 
B) if they expand aggregate demand,the inflation rate will increase further. 
C) they face a less favorable trade-off between inflation and unemployment than they did before the shock. 
D) All of the above are correct. 
A) if they contract aggregate demand,the unemployment rate will increase further. 
B) if they expand aggregate demand,the inflation rate will increase further. 
C) they face a less favorable trade-off between inflation and unemployment than they did before the shock. 
D) All of the above are correct.

Question 4

If there is an adverse supply shock,then

Accepted Answer

A) unemployment rises and the short-run Phillips curve shifts right. 
B) unemployment rises and the short-run Phillips curve shifts left. 
C) unemployment falls and the short-run Phillips curve shifts right. 
D) unemployment falls and the short-run Phillips curve shifts left. 
A) unemployment rises and the short-run Phillips curve shifts right. 
B) unemployment rises and the short-run Phillips curve shifts left. 
C) unemployment falls and the short-run Phillips curve shifts right. 
D) unemployment falls and the short-run Phillips curve shifts left.

Question 5

A favorable supply shock causes the price level to

Accepted Answer

A) rise.To counter this a central bank would increase the money supply. 
B) rise.To counter this a central bank would decrease the money supply. 
C) fall.To counter this a central bank would increase the money supply. 
D) fall.To counter this a central bank would decrease the money supply. 
A) rise.To counter this a central bank would increase the money supply. 
B) rise.To counter this a central bank would decrease the money supply. 
C) fall.To counter this a central bank would increase the money supply. 
D) fall.To counter this a central bank would decrease the money supply.

Question 6

An adverse supply shock shifts the short-run Phillips curve to the

Accepted Answer

A) right.This means the unemployment rate is higher at each inflation rate. 
B) right.This means the unemployment rate is lower at each inflation rate. 
C) left.This means the unemployment rate is higher at each inflation rate. 
D) left.This means the unemployment rate is lower at each inflation rate. 
A) right.This means the unemployment rate is higher at each inflation rate. 
B) right.This means the unemployment rate is lower at each inflation rate. 
C) left.This means the unemployment rate is higher at each inflation rate. 
D) left.This means the unemployment rate is lower at each inflation rate.

Question 7

A favorable supply shock will cause

Accepted Answer

A) unemployment to rise and the short-run Phillips curve to shift right. 
B) unemployment to rise and the short-run Phillips curve to shift left. 
C) unemployment to fall and the short-run Phillips curve to shift right. 
D) unemployment to fall and the short-run Phillips curve to shift left. 
A) unemployment to rise and the short-run Phillips curve to shift right. 
B) unemployment to rise and the short-run Phillips curve to shift left. 
C) unemployment to fall and the short-run Phillips curve to shift right. 
D) unemployment to fall and the short-run Phillips curve to shift left.

Question 8

If a central bank wants to counter the change in the price level caused by an adverse supply shock,it could change the money supply to shift

Accepted Answer

A) aggregate demand right. 
B) aggregate demand left. 
C) aggregate supply right. 
D) aggregate supply left. 
A) aggregate demand right. 
B) aggregate demand left. 
C) aggregate supply right. 
D) aggregate supply left.

Question 9

Which of the following is not associated with an adverse supply shock?

Accepted Answer

A) the short-run Phillips curve shifts left 
B) unemployment rises 
C) the price level rises 
D) output falls 
A) the short-run Phillips curve shifts left 
B) unemployment rises 
C) the price level rises 
D) output falls

Question 10

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate."    
-Refer to Figure 35-9.Faced with the shift of the Phillips curve from PC1 to PC2,policymakers will

Accepted Answer

A) ask whether the shift is temporary or permanent. 
B) be concerned with how people adjust their expectations of inflation as a result of the shift. 
C) face,as well,a decision as to whether to accommodate the shock. 
D) All of the above are correct. 
A) ask whether the shift is temporary or permanent. 
B) be concerned with how people adjust their expectations of inflation as a result of the shift. 
C) face,as well,a decision as to whether to accommodate the shock. 
D) All of the above are correct.

Question 11

A favorable supply shock shifts the short-run Phillips curve

Accepted Answer

A) right and inflation rises. 
B) right and inflation falls. 
C) left and inflation rises. 
D) left and inflation falls. 
A) right and inflation rises. 
B) right and inflation falls. 
C) left and inflation rises. 
D) left and inflation falls.

Question 12

A favorable supply shock causes output to

Accepted Answer

A) rise.To counter this a central bank would increase the money supply. 
B) rise.To counter this a central bank would decrease the money supply. 
C) fall.To counter this a central bank would increase the money supply. 
D) fall.To counter this a central bank would decrease the money supply. 
A) rise.To counter this a central bank would increase the money supply. 
B) rise.To counter this a central bank would decrease the money supply. 
C) fall.To counter this a central bank would increase the money supply. 
D) fall.To counter this a central bank would decrease the money supply.

Question 13

Which of the following is correct if there is a favorable supply shock?

Accepted Answer

A) the short-run aggregate supply curve and the short-run Phillips curve both shift right. 
B) the short-run aggregate supply curve and the short-run Phillips curve both shift left. 
C) the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. 
D) the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right. 
A) the short-run aggregate supply curve and the short-run Phillips curve both shift right. 
B) the short-run aggregate supply curve and the short-run Phillips curve both shift left. 
C) the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left. 
D) the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

Question 14

Which of the following would not be associated with a favorable supply shock?

Accepted Answer

A) the short-run Phillips curve shifts left 
B) unemployment falls 
C) the price level rises 
D) output rises. 
A) the short-run Phillips curve shifts left 
B) unemployment falls 
C) the price level rises 
D) output rises.

Question 15

If a central bank increases the money supply in response to an adverse supply shock,then which of the following quantities moves closer to its pre-shock value as a result?

Accepted Answer

A) both the price level and output 
B) the price level but not output 
C) output but not the price level 
D) neither output nor the price level 
A) both the price level and output 
B) the price level but not output 
C) output but not the price level 
D) neither output nor the price level

Question 16

Which of the following would cause the price level to rise and output to fall in the short run?

Accepted Answer

A) an increase in the money supply 
B) a decrease in the money supply 
C) an adverse supply shock 
D) a favorable supply shock 
A) an increase in the money supply 
B) a decrease in the money supply 
C) an adverse supply shock 
D) a favorable supply shock

Question 17

There is a temporary adverse supply shock.Given the effects of this shock,if the central bank chooses to return unemployment closer to its previous rate it would

Accepted Answer

A) raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right. 
B) raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left. 
C) reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right. 
D) reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left. 
A) raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right. 
B) raise the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left. 
C) reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve right. 
D) reduce the rate at which it increases the money supply.In the long run this will shift the short-run Phillips curve left.

Question 18

An adverse supply shock causes inflation to

Accepted Answer

A) rise and the short-run Phillips curve to shift right. 
B) rise and the short-run Phillips curve to shift left. 
C) fall and the short-run Phillips curve to shift right. 
D) fall and the short-run Phillips curve to shift left. 
A) rise and the short-run Phillips curve to shift right. 
B) rise and the short-run Phillips curve to shift left. 
C) fall and the short-run Phillips curve to shift right. 
D) fall and the short-run Phillips curve to shift left.

Question 19

In the 1970s,the Fed accommodated a(n)

Accepted Answer

A) adverse supply shock and so contributed to higher inflation. 
B) adverse supply shock and so contributed to lower inflation. 
C) favorable supply shock and so contributed to higher inflation. 
D) favorable supply shock and so contributed to lower inflation. 
A) adverse supply shock and so contributed to higher inflation. 
B) adverse supply shock and so contributed to lower inflation. 
C) favorable supply shock and so contributed to higher inflation. 
D) favorable supply shock and so contributed to lower inflation.

Question 20

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate."    
-Refer to Figure 35-9.Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?

Accepted Answer

A) a reduction in firms' costs of production 
B) a reduction in taxes on consumers 
C) an increase in the price level 
D) an increase in the world price of oil 
A) a reduction in firms' costs of production 
B) a reduction in taxes on consumers 
C) an increase in the price level 
D) an increase in the world price of oil

Exam 22: The Short Run Trade Off Between Inflation and Unemployment: Shifts in the Phillips Curve the Role of Supply Shocks

If the Federal Reserve accommodates an adverse supply shock,

A central bank that accommodates an aggregate supply shock

When they are confronted with an adverse shock to aggregate supply,policymakers face a difficult choice in that

If there is an adverse supply shock,then

A favorable supply shock causes the price level to

An adverse supply shock shifts the short-run Phillips curve to the

A favorable supply shock will cause

If a central bank wants to counter the change in the price level caused by an adverse supply shock,it could change the money supply to shift

Which of the following is not associated with an adverse supply shock?

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 35-9.Faced with the shift of the Phillips curve from PC1 to PC2,policymakers will

A favorable supply shock shifts the short-run Phillips curve

A favorable supply shock causes output to

Which of the following is correct if there is a favorable supply shock?

Which of the following would not be associated with a favorable supply shock?

If a central bank increases the money supply in response to an adverse supply shock,then which of the following quantities moves closer to its pre-shock value as a result?

Which of the following would cause the price level to rise and output to fall in the short run?

There is a temporary adverse supply shock.Given the effects of this shock,if the central bank chooses to return unemployment closer to its previous rate it would

An adverse supply shock causes inflation to

In the 1970s,the Fed accommodated a(n)

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 35-9.Which of the following events could explain the shift of the aggregate-supply curve from AS1 to AS2?

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Figure 35-9.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 35-9.Faced with the shift of the Phillips curve from PC₁ to PC₂,policymakers will